Getting What You Want from Inspection Negotiations
In our last blog post, we talked in detail about what to expect during home inspections and what kind of inspections are often chosen. Refer to that blog post for a great overview of the inspection process.
Now though, your inspectors have done their job and they have sent you their inspection reports. To recap, you have three options when you get your reports:
Ask for repairs
Move forward as-is
Walk away
The vast majority of inspections come up with at least something needing to be fixed. Even new construction homes can come up with items to be repaired.
That is why most people move forward with option number one: Ask for repairs.
WHAT CAN I ASK TO BE REPAIRED?
There are some things to keep in mind when asking for inspection repairs.
First, it’s important to know the purpose of the inspection in the first place.
The idea is to catch things that are broken or need to be repaired. A broken HVAC system, mold in the attic, bad electrical plugs, and missing smoke/CO detectors are common examples of things that need to be fixed.
In addition, the inspection will report items that are not necessarily broken but will need to be replaced soon. One common example of this is a roof that is near the end of its life span or is showing greater wear than is normal. Sellers will often price their homes to reflect these things and therefore are unlikely to pay an additional amount for updates.
Unless the item in question leaks or has functional issues, typically a seller will not pay for it to be replaced.
Other parts of the home you would like to change, like the design or floor plan, will not come up in the inspection report and should not be asked to be changed by the seller unless explicitly agreed to in the original offer. It is rare (if ever) that an agreement to renovate, for aesthetic purposes, occurs between a buyer and seller.
HOW CAN I NEGOTIATE AND GET WHAT I WANT?
It’s important to think back to the offer situation you were in.
The situation that you were a part of will impact your leverage in inspection negotiations.
For example, if you were part of a multi-offer situation with higher offers than you, but your offer was accepted because of the personal letter you wrote, you don’t have much leverage to ask for many repairs. There is typically no harm in asking, but if the seller knows there is still high interest in their house, they may reject your request to put their home back on the market.
However, if you placed an offer on a home that has been sitting on the market for a long time, or the sellers are on a time crunch, you can be more aggressive in what you ask for.
It is important to work with your agent to try to achieve a “win/win” situation with the seller.
Too aggressive and your seller may back out in concern that you will be a difficult buyer to work with, or may prove difficult down the road because they felt their arm was twisted.
Too passive and you will likely feel disappointed or angry that certain repairs were not completed before you moved in.
You both want to feel like you are getting what you expected going into the process so that the rest of the transaction runs smoothly.
This is where a quality agent will do their detective work. It’s amazing how asking certain questions can yield a gold mine of information. If your agent can figure out the most important desires of the seller, as well as what the seller is not particular about, your agent can use this to leverage the negotiations.
For example, the agent may find out that the seller is not willing to do repairs during the process, but is comfortable giving a lump sum of money for the repairs to be completed after the home closes. If this is the case, you can request “concessions”. This is a payment that goes into escrow and will be distributed to you after the transaction closes to put towards repairs. If you know this is what the seller wants, and you are comfortable with it, you can easily request this option knowing that the seller will most likely accept.
Another example may be that your agent discovers that the seller has been concerned about the broken sprinkler system for years, but does not feel that the electrical plugs need to be paid for. In this situation, you may decide to only request the higher paying repairs (like sprinklers) and choose to repair the plugs on your own budget to keep the seller happy.
It’s a fine line of keeping the relationship positive between you and the seller, while also making sure your needs are taken care of.
HOW WILL I SUBMIT MY REQUESTS?
First, you will discuss your final decisions with your agent.
Based on your decision they will create a repairs request to send to the seller’s agent.
Once the requests are sent, the sellers will then relay the information to the seller. At this point, you are back in contract negotiations. The seller has the right to accept, reject, or counter your offer.
HOW LONG DO NEGOTIATIONS TAKE?
We have found that asking good questions upfront to the seller’s agent cuts down on negotiations significantly.
When you know upfront what will likely be accepted or rejected you can make clear and concise negotiations from the start. When this is the case, the seller may accept the repair request the same day you send it.
However, if either party is indecisive, or both parties have opposing perspectives, then it may take more time—possibly several days—to complete the negotiations.
It is vitally important to remember that negotiations must be completed within the ten business day inspection window. For complex situations, this inspection window can be extended to allow for more negotiations or inspections, but that is the exception to the rule.
WHAT NEXT?
Once inspection negotiations are complete, the next step is for the repairs themselves to be completed. Depending on how the contract was written, the seller may do some repairs themselves or may hire a professional to complete the work. Sometimes a buyer may prefer to get the quotes and have the work done themselves.
When repairs are required to be completed before the sale, there will be a repair deadline. This is the date by which the seller is required to have the repairs completed by. After this date, there is a 2-3 day window in which the buyer can re-inspect the home to make sure the repairs are satisfactory.
If a repair is not up to par, you can talk with your agent. They will connect with the sellers agent to make a plan of action to get the repair where it meets the guidelines that the seller and you negotiated.
Once all the guidelines are met the inspection window closes and you get to move forward with the rest of the transaction!
If you have more questions about inspections or negotiation repairs please call us at (503) 583-2581.